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Monday, July 11, 2011

Killing The California Economy, One Sector At A Time

The Amazon Tax: Already Not Working

The so-called “Amazon Tax” is now California law, and it’s already not working. After having terminated their advertising relationships with thousands of California-based Internet businesses called "affiliates, leading out-of-state online sellers continue to sell into California without collecting the sales tax.

Proponents of the “Amazon Tax” claimed it would “create fairness” by “leveling the playing field” between California’s brick and mortar retailers and out-of-state online sellers. They claimed it would generate $200 million in new revenues for the state this year. But they were wrong.

So far all of the following online sellers have terminated their affiliate programs (if you know of others, please let me know):

Each affiliate program termination represents multiple lost jobs and significant lost income for California--losses that could have been avoided with a little commonsense. These losses will grow even larger as affiliate businesses pack their bags and move to more business-friendly states.

What I've Been Saying...

I've been warning for months that "Amazon Tax" legislation would backfire. Unfortunately these warning fell on deaf ears. Here's a video of one of my recent interviews on this topic. (Click the photo below to watch.)

All the people I know who were Amazon associates were people with limited income struggling to get by: laid-off teachers and workers, work-at-home moms, seniors feeling the pinch, students struggling to find jobs or make ends meet, and people with health problems who could work from home even if they couldn't work 9 to 5… This just isn't fair.

- Ellen, Orange County business owner

My business has been hurt by this ridiculous bill. Tons of people in my position are scrambling to figure what to do… For the first time, moving out of CA is appealing to me.

- Kevin, California e-business owner

I have already been terminated by five advertisers. I’ve been doing this for 10 years now, and I'm putting two kids through college. I don't really have the option to start job hunting. If I have to move Timbuktu or Hong Kong, that's what I'll do.

- Jennifer, California blogger and e-business owner

Essentially this is a California small business tax, so ultimately it hurts businesses like ours. When Illinois passed this law, all the major players in our industry moved out of the state. I'm afraid this will have a similar impact on California and cause the tech industry to migrate to other states.

- Loren Bendele, Savings.com

[We're considering] everything from layoffs, at least a freeze in hiring -and we're a business that has been growing and hiring over the last few years-, all the way up to leaving the state.

- Rob Smahl, Ebates.com

Right now, 25% of our business is online, and half of that is Amazon. If we don't have Amazon it would seriously impact our business. It would make it difficult to remain open as a bookstore.

- Michael Smythe, San Diego bookstore manager

A number of merchants have let us know that as long as we remain a California affiliate, they cannot do business with us, so we are looking into alternatives, including moving some or all of our operations out of state and changing the way we do business. Without this, we'd be growing rapidly in San Francisco.

- Oliver Roup, founder of VigLink

So far we have received termination notifications from just over 100 of our merchant partners. However, we expect this number to increase over the coming weeks as more merchants receive word from their legal teams that they must sever their ties with California affiliates.

- Alex Caldwell, SurfMyAds.com

Business owners and entrepreneurs are already leaving California in droves, and now you'll see career affiliates jumping on that bandwagon. They won't have a choice. Here in Texas I regularly joke that there are more cars with California plates than Texas plates on the road, and that's exactly due to California's anti-business climate that just keeps getting worse.

- Frank Rumbauskas, best-selling author

The only people hurt by this ham-fisted money grab are the affiliates — mainly small businesses that help Amazon and other Web retailers sell their products for a small commission.

The sad thing is that all of this was predictable, because it has played out in other states where lawsuits have been filed and very little if any extra tax revenue has come in from what has been dubbed ‘The Amazon Tax.’

Their decisions won't prevent Californians from buying from Amazon and other online retailers. But they will affect organizations like the California State Military Museum, which earned about $2,000 a year as an Amazon affiliate.